NEW DELHI: State-run oil and gas explorer ONGC has sought clarity from the government on subsidy sharing mechanism as it plans to expand its downstream business.
With the government already providing exemption from subsidy-sharing for this fiscal due to sharp fall in global crude prices, the explorer is asked to make a presentation to the oil ministry for a ceiling beyond which the upstream should contribute towards the subsidy.
D K Sarraf, chairman and managing director, ONGC said, “We have already made a presentation to the oil ministry and have sought clarity on the subsidy sharing mechanism. Since crude oil prices are now low, we have been exempted. But once the price goes up, we will be asked to bear the bill again. We wanted to get clarity and fix a ceiling on the crude price.” However, according to sources, the explorer has expressed that if crude prices go beyond $60 per barrel, then subsidy should be shared by upstream companies too.
“Our refining subsidiary, MRPL has achieved its highest throughput of 15.53 million metric tonnes with a strong gross refining margin of $5.2 per barrel. With low crude oil prices, our focus is now on to increase the retail footprint by opening 100 retail outlets and become a strong player in the southern part of the country,” added Sarraf.
With the government paving the way to open up competition, by deregulating petrol in June 2010 and diesel in October last year, entry for private players has gotten easier with the establishment of a level playing field.
Presently, the top three state refiners controls over 95 percent of the market. Reliance Industries Limited (RIL) also plans to dominate the market in this segment. RIL has already started operations of around 1,050 fuel stations out of a total of 1,400 outlets that it has in the country. The company is also learnt to be offering a discount of around `2 per litre of diesel at a few company-owned and company-operated (COCO) outlets.
The move will provide relief to exploration and production companies, which are grappling with squeezed margins because of low crude prices at present and are looking at other avenues to mobilise resources for more investments.
The country imported 202.1 million tonnes of crude oil in FY 16 compared to import of 189.4 million tonnes of crude oil for $112.7 billion in the FY15.